The department-store chain today filed a prospectus for the
shares that account for about 18 percent of its stock and make
Pershing its largest investor. Under the registration agreement
filed on Aug. 16, the hedge fund can start selling blocks of the
stock four times a year.

The stake sale coincides with Ackman’s agreement earlier
this month to quit the board of J.C. Penney after a public clash
over its direction and management succession. It also brings to
an end a saga in which Ackman’s handpicked CEO Ron Johnson
alienated customers with a plan to turn the chain into a
collection of boutiques and presided over its worst annual sales
in more than two decades.

“Ackman overplayed his hand with Johnson,” Paul Swinand,
an analyst for Morningstar Inc. in Chicago, said in an
interview. The move to sell his stake will be the end of “a
debacle” for J.C. Penney and its shareholders, he said.

J.C. Penney shares dropped 1.7 percent to $13.12 in
extended trading, after falling 1.1 percent to $13.35 at the
close in New York. The stock has declined 32 percent this year
compared with a gain of 16 percent for the Standard & Poor’s 500
Index.

Largest Shareholder

If Pershing sold its stake in the Plano, Texas-based
retailer at today’s closing price, the fund would take a loss of
$490 million, according to data compiled by Bloomberg. Ackman
declined to comment in an e-mail.

Pershing became J.C. Penney’s largest shareholder in
October 2010. Ackman then joined the board in February 2011 and
began pushing for changes, assuming the activist investor role
he also took at many companies, including Target Corp. Four
months later, J.C. Penney chose Johnson to replace Mike Ullman
as CEO, hiring him away from heading Apple Inc.’s successful
stores.

After sales fell 25 percent last year, leading to a net
loss of $985 million, Johnson was ousted in April and replaced
by Ullman as interim CEO.